Answer:
Explanation:
The first part of the question is missing, so I looked for a similar question to fill in the blanks.
<em>Willie Cheetum is the CEO of Happy Foods, a distributor of produce to grocery store chains throughout the Midwest. At the end of the year, the company's accounting manager provides Willie with the following information, before any adjustment.
</em>
<em>
Accounts receivable $858,000
</em>
<em>
Estimated percentage uncollectible 10%
</em>
<em>Allowance for uncollectible accounts $20,000 (credit)
</em>
<em>Operating income $249,000 </em>
1. Record the adjustment for uncollectible accounts using the accountant's estimate of 10% of accounts receivable.
Dr Bad debt expense 65,800
Cr Allowance for uncollectible accounts 65,800
($858,000 x 10%) - $20,000 = $65,800
2. After the adjustment is recorded in Requirement 1, what is the revised amount of operating income?
$183,200
3. Willie instructs the accountant to record the adjustment for uncollectible accounts using 7% rather than 10% of accounts receivable. Now will Willie get his salary bonus? Explain.
bad debt expense = ($858,000 x 7%) - $20,000 = $40,060
so adjusted net income = $249,000 - $40,060 = $208,940
Willie will get his bonus.
By how much would total assets and operating income be misstated using the 7% amount?
$65,800 - $40,060 = $25,740
